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Heads Up: New 2020 Overtime Rules

As you are in the Fall rush to complete jobs in your pipeline, here is a “heads up” on a new issue for you to consider for your 2020 forward planning.

The Department of Labor (DOL) has issued a “final rule” that might impact your labor costs for 2020. In late September, the DOL has made changes to the overtime rules that will raise the current thresholds of eligibility and expand the workers eligible for overtime by an estimated 1.3 million workers. Those additional workers will be eligible for time and a half pay for work over 40 hours a week for the first time.

This is the first time that the overtime thresholds have been revised since 2004. A 2016 attempt under the Obama Administration was rejected, the formulas rewritten, and under the Trump Administration accepted this year.

The acting Labor Secretary, Patrick Pizzella, wrote in the Wall Street Journal, “After Jan. 1, 2020, all nonexempt employees who earn less than $35,568 a year will be entitled to time-and-a-half overtime pay, regardless of their duties.”

He continued, The main beneficiaries of this higher overtime salary threshold will be people who did not go to college, rural Americans and older workers. Nearly 60% of workers over 25 who do not have a bachelor’s degree earn less than $35,000 a year, according to the Census Bureau.”

The new action announced by DOL is:

  • raising the “standard salary level” from the currently enforced level of $455 per week to $684 per week (equivalent to $35,568 per year for a full-year worker);
  • raising the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year;
  • allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices; and
  • revising the special salary levels for workers in U.S. territories and the motion picture industry.

The final rule is effective on January 1, 2020.

To research the new rule and its impact on your business, you can go to the DOL Frequently Asked Questions at: https://www.dol.gov/whd/overtime2019/overtime_FAQ.htm